The Rise of DeFi Ecosystem Amidst the Solana Wave

In this cycle, Solana's strong comeback from adversity has brought prosperity to the entire Solana chain ecosystem. In recent months, the popularity of memecoins on Solana has attracted the attention of the vast majority of players, and along with the wealth effect of memecoins, a large influx of funds has followed. As shown in the figure below, with the increase in the price of Solana's native currency and the influx of on-chain funds, the TVL on the Solana chain has grown from 300 million to 4 billion from Q3 2023 to July this year.

The massive increase in on-chain funds has led to a demand for relatively stable DeFi yields. Currently, DeFi yields on the Solana chain mainly consist of interest-bearing assets within individual products, primarily including LST (Liquid Staking Token) assets in Jito, Sanctum, and The Vault, as well as JLP-type on-chain perpetual contract trading pools. DeFi Lego-like products similar to those in the Ethereum ecosystem have not yet been widely adopted.

In addition to native DeFi yields such as staking, lending, and trading, as DeFi scenarios are increasingly used in the Solana ecosystem, DeFi products are choosing to incentivize liquidity through point-based airdrops. This means that users earn corresponding points after staking funds or engaging in specific interactions within the products, and these points can be exchanged for project tokens during the project's TGE.

Currently, leading DeFi products on Solana, such as Kamino, The Vault, and Sanctum, all use a point system as the basis for airdrop tokens. However, different users have varying time costs, expected returns from project tokens, and risk preferences, leading to a demand for separating the returns embedded in points.

As DeFi activities continue to grow within the Solana ecosystem, the demand for a yield layer that can reallocate the different returns and risks embedded in assets is becoming increasingly significant.

NX Finance is precisely designed to meet this demand. It builds on the foundational DeFi products of Solana, focusing on optimizing the reallocation of asset returns and risks, similar to the role Pendle plays in the Ethereum DeFi ecosystem.

About NX Finance ------ The Yield Layer of Solana DeFi Ecosystem

NX Finance's Goals and Vision

As a frontier explorer of the Solana DeFi ecosystem, NX Finance aims to become the yield layer of Solana DeFi, with the core strategy of separating the yield leverage of interest-bearing assets and the returns from airdrop points. This balances the personal investment preferences and risk tolerance of different investors while enhancing potential returns.

Currently, for DeFi users on Solana, NX Finance has established the Fulcrum Strategy Pool and Gold Mining Strategy Pool, corresponding to the two strategies mentioned above, allowing users to choose the yield strategy that best suits them. Let's delve into each strategy.

Fulcrum Strategy: Maximizing Returns Beyond Simple Holding of Interest-Bearing Assets

In the Fulcrum strategy, NX Finance acts as a platform that connects users who want to leverage interest-bearing asset returns with those seeking stable lending yields. Simply put, lenders deposit stablecoins into the lending pool, while borrowers use interest-bearing assets as collateral to pay borrowing rates, borrowing stablecoins to purchase more interest-bearing assets, thus achieving leveraged returns. In this process, lenders earn stable lending rate returns, while borrowers achieve higher yields.

Taking the currently launched JLP (Jupiter Liquidity Provider) asset pool as an example, borrowers can collateralize JLP and borrow USDC from the lending pool based on their leverage ratio to purchase more JLP for higher returns, while paying interest to the lending pool. The current limit of 500K for the lending pool has already been fully filled, with a fund utilization rate of 76.35%.

According to the roadmap, NX Finance will integrate more interest-bearing assets in the future, including FlashTrade's FLP. Notably, GMX, a leading on-chain perpetual contract exchange in the Ethereum ecosystem, recently released a community proposal to deploy its v2 version on Solana. If all goes well, NX Finance will also integrate the corresponding GMSOL assets.

Gold Mining Strategy: Splitting the Embedded Returns of Airdrop Points

As mentioned earlier, leading DeFi protocols on Solana currently adopt a point system as the standard for airdrops. However, different users have varying risk preferences and capacities, leading to a demand for splitting the returns embedded in airdrop points, i.e., risk reallocation. Specifically, borrowers collateralize assets in NX Finance, pay borrowing interest to borrow assets from the lending pool, and deposit them into the target airdrop protocol through NX Finance to increase their point quantity for potential future airdrop returns. Meanwhile, lenders can earn borrowing interest from borrowers, gaining risk-free returns during the point airdrop activity.

According to community information, the point yield splitting pools for SolLayer, The Vault, and Sanctum are about to launch, and airdrop hunters in the Solana ecosystem should closely monitor the dynamics of these pools. As NX Finance develops as the yield layer of Solana DeFi, more protocols will be integrated into the product.

How NX Finance Accelerates the Development of Solana DeFi Ecosystem

Seamless Integration of Interest-Bearing Assets

NX Finance's first approach is to integrate with other yield assets. The benefit of embedding yield assets into leveraged farming strategies is that it allows for the reallocation of risks associated with a single asset. Compared to merely investing in a single yield asset, NX Finance enables users to adjust leverage ratios to match their own risk preferences.

For example, the JLP leveraged farming strategy built using JLP as the underlying asset can maximize potential returns for JLP holders. Borrowers can collateralize a certain amount of JLP to achieve up to 5x leveraged returns on JLP. In June, this strategy had an average annualized yield (APY) of up to 220%. At the same time, using the relatively stable JLP as the underlying asset can avoid exposing borrowers to excessive risks compared to other high-yield derivatives.

In summary, NX Finance leverages the composability of relatively stable yield assets (such as JLP and FLP) on Solana to provide holders with a channel to adjust leverage ratios. This allows investors holding these yield assets to achieve risk reallocation during the holding period to meet different risk preferences.

Risk Reallocation of Point Airdrops

Additionally, NX Finance introduces an innovative airdrop strategy. This strategy uses "points" as a medium to redistribute expected airdrop returns over time for both lending and borrowing parties.

Clearly, we all have concerns about the expected value of airdrops, which is often uncertain and poses a primary risk for participating in such protocols. Users may face implicit losses due to locked liquidity but ultimately do not receive satisfactory airdrop returns.

NX's airdrop farming strategy aims to mitigate this issue by reallocating risks. For those who can tolerate very low risks, they can ensure a certain leveraged staking interest by redeeming points, thus realizing airdrop expectations in advance. Conversely, for those inclined to seek risks, they can choose to forgo staking interest in exchange for leveraged points to ensure a larger position in airdrop activities. In short, the point farming strategy not only provides an alternative for users of pre-airdrop products to match different risk preferences but also extends risk allocation to the time dimension.

We know that for AirdropFi, the primary risk is the user's time cost. NX's strategy offers an alternative for airdrop hunters with different risk preferences while also extending risk allocation to the time dimension. This is undoubtedly a significant innovative attempt in DeFi yield strategies.

Future Development of NX Finance

In Q3, NX Finance will have some significant moves, closely following the active pace of the Solana DeFi ecosystem, opening lending pools for more assets to allow users to gain a wider variety of yields on the platform. In addition, NX Finance's airdrop season has already begun on July 1, and after the airdrop season ends, the IDO will officially start at the end of Q3.

Airdrop Season One ------ Point Adventure Activity

The first phase of NX Finance's airdrop season ------ the Point Adventure activity officially started on July 1. The point system is divided into three parts: total locked amount (TVL) points, referral system, and team gains. Among them:

• Total Points = Total Locked Amount Points + Referral Points

• Daily Total Locked Amount Points = Total Locked Amount Points in the Vault * (1 + Xcelerator Bonus)

• Referral Points = 10% of your friends' total locked amount points in all vaults

Xcelerator is a point accelerator that can be obtained by completing NX's Xcelerator tasks.

For more details on the Point Adventure, you can check NX Finance's official announcement tweet.

Conclusion

As the Solana DeFi ecosystem develops, NX Finance is becoming one of its most critical components. It offers strategies to maximize returns while balancing risks through modular and composable solutions. With the rise of DeFi on Solana, NX Finance is poised to lead the trend, enhance the maturity of the ecosystem, and provide diversified yield products that cater to different risk preferences.

With NX Finance's expansion around yield leverage and point leverage strategies, it stands at the forefront of Solana DeFi development.